Annuity Income Strategies — How to Create Guaranteed Retirement Income

The Income Floor Strategy

The income floor strategy is the most widely recommended approach to retirement income planning. The goal is to cover all essential expenses — housing, food, healthcare, utilities — with guaranteed income sources. Social Security forms the foundation. An annuity with a lifetime income rider can fill the gap between Social Security and your essential expenses. Everything above the floor can be invested for growth and discretionary spending.

Income Riders — Guaranteed Lifetime Withdrawal Benefits

A Guaranteed Lifetime Withdrawal Benefit (GLWB) rider is an optional feature added to a deferred annuity that guarantees you can withdraw a set percentage of your benefit base each year for life, regardless of how the account performs. For example, a 5% GLWB rider on a $200,000 annuity guarantees $10,000 per year for life — even if the account value drops to zero.

• Guarantees a minimum annual withdrawal for life
• Benefit base grows at a guaranteed rate during deferral
• Withdrawals can begin at a specified age
• Account value can still grow and pass to heirs
• Rider charges typically 0.5–1.5% per year

Annuity Laddering

Annuity laddering involves purchasing multiple annuities at different times or with different income start dates. This strategy reduces the risk of locking in all your money at a single interest rate and allows you to benefit from potentially higher rates in the future. For example, you might purchase one annuity now and another in 5 years, creating staggered income streams that begin at different ages.

Combining Annuities with Social Security

Social Security and annuities work well together. Social Security provides inflation-adjusted lifetime income starting at 62–70. An annuity can bridge the gap between retirement and Social Security claiming age, or supplement Social Security to cover all essential expenses. Delaying Social Security to age 70 (for the highest benefit) while using an annuity for income in the early retirement years is a common strategy.

Using a Deferred Income Annuity for Longevity Protection

A deferred income annuity (DIA) purchased at age 65 to begin income at age 80 or 85 provides very high monthly payments because of the long deferral period. This 'longevity insurance' strategy allows you to spend down other assets more confidently in your 60s and 70s, knowing that guaranteed income will kick in if you live into your 80s and 90s.

Getting a Personalized Income Strategy

The right annuity income strategy depends on your Social Security benefit, other income sources, essential expenses, health, and risk tolerance. AG Insurance provides free retirement income consultations to help West Virginia residents design a strategy that fits their specific situation.